| #542 - January 24, 2008 |
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| #541 Updated: 1/23/08 9:53 a.m. MAN SENTENCED FOR EMBEZZLING MORE THAN $5.3 MILLION fbi.gov | 1/18/08 | press release Kevin J. O'Connor, United States Attorney for the District of Connecticut, announced that JEFFREY F. GROUS, 44, of Tolland, was sentenced today by United States District Judge Janet Bond Arterton in New Haven to 36 months of imprisonment, followed by three years of supervised release. Judge Arterton also ordered GROUS to pay a fine in the amount of $10,000. On July 9, 2007, GROUS waived indictment and pleaded guilty to one count of wire fraud, one count of mail fraud, one count of tax evasion, and one count of filing a false tax return. The charges stem from a decade-long scheme through which he embezzled approximately $5.3 million from his former employer. According to documents filed with the Court and statements made in court, GROUS was an employee of a global investment firm specializing in fixed-income products. Between 1991 and 2005, GROUS held various positions at the investment firm, including Assistant Vice President, Assistant Controller, and Controller. As Controller of the investment firm, GROUS had responsibilities such as financial reporting auditing, budgeting, and asset management billing. In pleading guilty, GROUS admitted that, between approximately February 1996 and April 2005, he devised a scheme to defraud the investment firm of approximately $5.3 million and spent the money for his own personal use and enjoyment, including the purchase of watches totaling approximately $449,219.02, the construction of a luxury home, and the purchase of expensive cars, clothing, and vacations. As part of the scheme, GROUS formed two sham companies, Equity Analysis and Research Consultants. He then submitted false invoices for consulting services by these sham companies and approved the fraudulent requests, or forged the signature of an officer at the investment firm with the authority to approve the payment requests, which resulted in the investment firm paying approximately $1.86 million to Equity Analysis and $1.25 million to Research Consultants. In addition, from approximately June 1996 through December 2004, GROUS submitted to the investment firm AMEX charges and fraudulent payment forms, including a false description that the expenses were for business purposes of officers of the investment firm. GROUS approved, or forged the signature of others for approval, AMEX charges, which resulted in the investment firm making payments of approximately $2.24 million to AMEX for GROUS' personal expenses. Finally, GROUS filed false income tax returns for the years 2000 through 2002 and evaded the payment of taxes for the years 2003 and 2004. To date, GROUS has paid to his former employer restitution in the amount of $915,125.04. Today, Judge Arterton ordered GROUS to pay an additional $4,431,382 in restitution. GROUS also owes back taxes in the amount of $1,635,932, plus substantial penalties and interest. IRS says Enron stock can't be deducted as theft losses chron.com | 1/23/08 | Shannon Buggs Q: We still own Enron stock and qualify for the reimbursement package that was mailed to investors this week. My question: Can we deduct the losses not covered by the reimbursement as theft losses on our taxes next year? At what point does a capital loss become a theft loss? A: No, you cannot deduct as theft losses the amount you invested in Enron stock that is not covered by the reimbursement. The Internal Revenue Service stated in an April 19, 2004, notice that it would "disallow such deductions and may impose penalties" on taxpayers who claimed theft loss deductions for "the decline in market value of their stock caused by disclosure of accounting fraud or other illegal misconduct of the officers or directors of the corporation that issued the stock." The tax code limits losses for individuals to: • Losses incurred in a trade or business. • Losses incurred in any transaction entered into for profit outside of a trade or business, which are called capital losses. • Losses of property not connected with a trade or business or a transaction entered into for profit, if such losses arise from theft or casualties, such as fire, storm and shipwreck, which are called theft or casualty losses. In its notice, the IRS cites several judicial rulings that have found that capital losses do not become theft losses, even when a stock becomes worthless because of "corporate officers misrepresenting the financial condition of the corporation, even when the officers were indicted for securities fraud or other criminal violations." You can challenge that determination by filing a lawsuit and proving in court that the "loss resulted from a taking of property that is illegal under the law of the state where it occurred and that the taking was done with criminal intent." Otherwise, claim a capital loss. Capital losses are deducted first from capital gains, and then again up to $3,000 of other income. Any amounts of the loss remaining can be carried over into future tax years. A carry-over loss may be deducted from capital gains in later years plus up to $3,000 of ordinary income. • IRS Notice: www.irs.gov/irb/2004-16_IRB/ar09.html Daniloo's ex-wife: I never suspected modbee.com | 1/23/008 | Garth Stapley Tony Daniloo kept her in the dark for years, his wife said, while swindling millions of dollars in one of Modesto's most notorious fraud schemes. Nansi Masihi, who dropped her married name when her divorce from the convicted con man became final last week, mentally pummels herself for not seeing the signs of corruption that since have become so obvious to her. She periodically shed tears Thursday in a lengthy interview, the first either has given since their high-profile arrests five days before Christmas 2004. "I was stupid," she said. "My biggest mistake in life was trusting him." Masihi, 32, worked as a mortgage loan officer in the middle of her husband's six-year bilking binge, although for another company. They shared a bank account. But she had no idea, she said, that the millions he later brought home, only a year after the third bankruptcy of their relationship, were tainted. When Daniloo bought their spacious, $1 million Turlock home using the name of Masihi's younger sister, a college student, it made some sense because of their poor credit, Masihi said. She didn't complain when Daniloo stocked the garage with five luxury vehicles, three of them worth more than $90,000 each. And Masihi was living large with the boat, Rolex and huge, flashy diamonds on her fingers and earlobes. Meanwhile, her husband must have forged the signatures of both sets of their parents when he stole their Turlock homes, Masihi said. Her first clue that something might be out of place, she said, came when her husband decided to name a pediatric wing after her in a $4.5 million pledge to Turlock's Emanuel Medical Center in October 2004. A month later, his $1 million pledge to California State University, Stanislaus, prompted another big newspaper headline. Masihi continued to believe her husband's stories when The Bee detailed the couple's troubled past in December 2004. The articles stemmed mostly from Daniloo's East Bay deals years before and had little to do with DreamLife Financial, the mortgage company he had since established in Modesto, she noted. She had no inkling, she said, that he had swiped $6.7 million in less than a year. Handcuffs, snapped on her wrists eight days after The Bee's exposé, helped awaken her. She quickly posted bail and, with her toddler, moved into her parents' Turlock home, where they still live, she said. A court document from early 2006 suggests that she worked a deal with prosecutors to repay victims $368,000 to escape four felony counts. But all charges were dismissed and she owes nothing, according to records dated shortly before her husband pleaded guilty a few months afterward. She refused to answer questions about her case. Neither would she discuss the trio of bankruptcies, except to blame them on Daniloo, including one she filed a year before they wed. Societe Generale Uncovers Massive Fraud ap.google.com | 1/23/08 | Matt Moore fraud — one of history's biggest — by a single futures trader who orchestrated a series of bogus transactions. The fraud destabilized a major bank already exposed to the subprime crisis. France's second largest bank by market value said it must seek 5.5 billion euros ($8.02 billion) in new capital, and the chief executive offered to resign. Trading in Societe Generale's shares, which have lost nearly half their value over the past six months, has been suspended. The bank said it detected the fraud at its French markets division the weekend of Jan. 19-20. In a statement announcing the discovery, it called the fraud "exceptional in its size and nature." A bank official said the trader "acted alone." It said a trader at the futures desk had misled investors in 2007 and 2008 through a "scheme of elaborate fictitious transactions." The trader, who was not named, used his knowledge of the group's security systems to conceal fraudulent positions, a SocGen statement said. An analysis confirmed the "exceptional nature" of the fraud, the bank said. The trader confessed to the fraud, the bank said, and was being dismissed. His supervisors were to leave the group. Chief Executive Daniel Bouton offered his resignation but it was rejected by the board. The trader at SocGen was responsible for basic futures hedging on European equity market indices, the company said, making bets on how the markets would perform at a future date. Futures trading began with selling commodities like sugar or oil to be delivered at a specified date. The practice has expanded enormously in recent years to include extremely complex financial instruments, but the company statement said the trader was involved in the more basic forms of hedging. If confirmed, the fraud would far outstrip the Nick Leeson trading scandal in 1995 that bankrupted British bank Barings. Barings collapsed after Leeson, the bank's Singapore general manager of futures trading, lost 860 million pounds — then worth $1.38 billion — on Asian futures markets, wiping out the bank's cash reserves. The company had been in business for more than 230 years. The Bank of Credit and Commerce International failed after a 1991 scandal that led to claims by depositors and creditors exceeding $10 billion at the time. Gilles Glicenstein, president of asset management at rival French bank BNP Paris — France's largest — said, "It shows that we are in a very troubled period for banks, and I think that it's in such troubled periods that difficult things happen." "This is not good news for Societe Generale, but also for banks in general. It can create doubt, but at the same time in this period, we are making efforts to be transparent in order to give confidence back," he said at the World Economic Forum in Davos, Switzerland. Axel Pierron, senior analyst at Celent, an international financial research and consulting firm, was stunned that a trader could be involved in such a massive fraud 13 years after the Barings Bank collapse. "The situation reveals that banks, despite the implementation of sophisticated risk management solutions, are still under the threat that an employee with a good understanding of the risk management processes can getting round them to hide his losses," he said. At Societe Generale, the fraud announcement came on the back of subprime-related difficulties. Subprime writedowns linked to the crisis in financial markets amounted to 2.05 billion euros ($2.99 billion), Societe Generale said. The Bank of France said it was immediately informed of the fraud and was investigating. The French market regulator said it had no comment. France's Banking Federation also declined to comment. Ex-school bookkeeper accused of embezzlement oregonlive.com | 1/23/08 | Michele Trappen and Holly Danks HILLSBORO -- The former bookkeeper of City View Charter School, who has a criminal record for stealing from charity, is under investigation on accusations of embezzling at least $64,000 from the city's only charter school. According to a report that school leaders filed Tuesday with the Hillsboro Police Department, Michelle Lorraine Wheeler, 36, is suspected of taking the money from the K-8 school that operates from two sites, including its main building on Tualatin Valley Highway. Hillsboro police detectives and City View auditors are investigating what happened to another $20,000 that is missing, said Lt. Michael Rouches, Hillsboro police spokesman. Wheeler's attorney, Mark Cogan, said his client offered to pay back the $64,000 in exchange for not admitting guilt. But Linda Mokler, City View's school board president who was present when the offer was made Jan. 14, said it was rejected because the full fivemember board was not present and she could not make "a decision of that nature." Mokler said that meeting finally explained the money's disappearance after two months of questions. The police report indicates that City View hired Wheeler in June 2006, but administrators aren't sure when money started disappearing. Wheeler was a contract employee, Mokler said. Wheeler resigned Dec. 11. In August 2007, Wheeler pleaded guilty to stealing $5,900 from In Defense of Animals -- Africa, a "Save the Chimpanzees" charity she handled books for between October 2006 and July 2007. The Hillsboro woman also is scheduled to be arraigned next month on theft and other accusations involving Safe Harbor Foundation, a clothes closet she's run for more than two years for low-income families in Washington County. Wednesday night, leaders at City View, which 154 students attend, planned to reveal the news to parents at a special meeting. "We are moving to get this resolved as quickly as possible," Mokler said. "The school is solvent through the end of this year. There is no chance that the school will be here one day and gone the next." Police: Woman charged with embezzlement has a history reflector.com | 1/24/08 | Ginger Livingston A woman arrested Tuesday on embezzlement charges told police she needed the money in part to pay court costs associated with two previous embezzlement convictions, an investigator said. Sandra Nicole Johnson, 33, of 1055 Teakwood Drive is accused of taking $48,000 from the McDonald's restaurant she was managing at 2116 S.E. Greenville Blvd, according to the Greenville Police Department. She is charged with eight counts of embezzlement. She was released from the Pitt County Detention Center Tuesday under a $20,000 secured bond. The restaurant is owned by Wilson-based Dixon Foods Group. A problem was first spotted by a district manager who handled the restaurant's banking when Johnson was on leave because of a death in her family, said Greenville police detective Tom Woolard. After several days, the district manager determined there were paperwork problems. The company performed an audit and with assistance from its bank, "determined deposits were not being made in the manner the company prescribed," and money was missing, Woolard said. The police were contacted and it was determined the money was taken during a period from October to December, Woolard said. Johnson took the manager's job in July. She had worked for Dixon Foods Group in Snow Hill in the previous year, Woolard said. "We are shocked and saddened by this situation," Wade Dixon, owner/operator of Dixon Foods Group said in a statement released through a public relations firm. "We have worked closely with local authorities to quickly identify the issue and support their investigation. This is the first time that something like this has happened in my many years of doing business, and we are confident that the authorities will effectively manage the matter through the appropriate processes." Tuesday's arrest was not Johnson's first run-in with the law. She spent nearly 13 months in prison after being convicted in Wayne County for a Jan. 25, 2002, arrest on an embezzlement charge, according to the state Department of Correction offender's Web site. Prior to that arrest, she was serving a suspended sentence for a New Hanover County conviction for embezzlement following arrests on June 1, 2001, and Sept. 4, 2001, according to the state Department of Correction. After her arrest Tuesday, Johnson told officers she was experiencing financial problems related to an illness in her family and difficulties she was having make payments that were a condition of her probation, Woolard said. |